Trading forex is the art of selling and buying foreign exchange. It is a very lucrative business growing by the volume of trade, expert advice available, leverage and low startup capital. Trading forex is simple since the basic things to know about forex are simple and common place. The people who trade forex professionally obtain no special degree neither are they born with some special gifts. This goes to show that with commitment and practice, anyone, and I mean anyone, can trade forex and be a success at it.
HOW TRADING FOREX WORKS
The forex market is a financial market that deals with currency. Buying and selling of currency to be specific. But how is this done? Note one thing, the forex markets is controlled mostly by speculators; this is common to most financial markets though. Speculators determine or decide how profitable a currency might be at a future date by looking at economic parameters, political clouds and other things revolving around the economy or national life. International events also play a role. The speculator now based on this projected behavior of the currency at a future date places a bet that there will be a price fall or rise, this is done by buying the currency that will rise at that future date and selling the one that will fall. From its earliest times the forex market has been the exclusive reserve of big business like banks but he internet explosion changed all that, now the retail investor has a substantial share of the market even though they banks still dominate. The stock market facilitates international trade but the main reasons why most people go into it are for speculation.
HOW TO TRADE FOREX
Since most people are speculators we will dwell on that aspect. How it is done is that a trader opens a trade by predicting which currency out of a pair, will increase in value. What follows is that the one that will increase in value according to the speculation will be bought and the other sold.
WAYS IN WHICH FOREX CAN BE TRADED
There are a variety of ways of trading forex. The method adopted can be based on some factors such as
- AUTOMATED SYSTEM
There are now powerful systems that allow you to trade in absentia. What this means is that the computer software can handle your forex trading on your behalf. Such systems are becoming better. They don’t guarantee wins only, but even the best human systems don’t either. It has the major advantages of freeing the time of the investor
TIME AVAILABLE TO THE INVESTOR
For someone who has a full time job, it is less likely that they will have that time to do forex trading by themselves. Such people often resort to automated trading or investing via a platform where the trading is done for them at a certain fee.
There is a minimum investment that is acceptable by fund managers, so investors who don’t have up that amount would have to do their own trading or use the automated method. Also, most good software is expensive so that may play a role in the final model that will be used for trading.
Of course there is a basic knowledge or understanding of forex required to start trading, an investor may not be having the chance or patience to learn this skills. Such an investor will have no choice but to have his portfolio managed by fund managers.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.